How to

Structure
Bonuses
at Restaurants
When Employees Act
Like Owners, Profits Soar

In almost every industry, top-performing businesses are incentivizing employees to act more
like owners. The thinking is simple: When pay is tied to performance, people are more strongly
aligned to the company’s overall goals and more accountable for their own performance. The
25% 22% 21%
right incentives prompt employees to act entrepreneurially - leading them to go the extra mile to
help the organization succeed.

It’s ushered in an era where “intrapreneurs” are doing incredible things to increase revenues, Bonused employees are more engaged — and
reduce costs, and drive profits higher. Facebook’s famous “Like” button wasn’t invented by engaged employees perform better. Companies in
Marc Zuckerberg. It was created by an engineering team including Leah Pearlman1 and Justin the top 25% in employee engagement ratings are
Rosenstein2 — and it helped transform Facebook into a multibillion-dollar data and advertising 22% more profitable and 21% more productive
engine. Google’s crazy popular Gmail was invented by engineer Paul Buchheit3 and is now than the rest. They also saw significantly lower
used by 1.5 billion people around the world.4 The incredibly handy Post-it Note? It was invented turnover, absenteeism, and workplace injuries.7
by 3M chemist Spencer Silver, and 50 billion are sold each year.5 These employees acted like
owners and created innovations that truly changed the game for their companies.

When restaurants incentivize employees to act like owners, they’re more engaged and
perform at a higher level. Want your chef to create a delicious, innovative new menu item?
Want your manager to promote your restaurant to her Instagram followers? Give them bonuses.
In fact, 67% of restaurant employees would like to receive paid bonuses as recognition for a job
well done.6
1. Vice
2. The Verge
3. Time
4. CNBC
5. CNN
6. 7Shifts
How to Structure Bonuses at Restaurants 7. Gallup 2
In restaurants, bonuses and
incentives lead to increases in:

Alignment
When you align business goals with performance goals, managers and
67%
of restaurant employees would
restaurant operators work together to increase sales and profits and cut costs.
like to receive paid bonuses as
recognition for a job well done6
Ownership
When chefs, managers, and service staff feel like their actions truly matter to
the bottom line, they’re empowered to work harder. That also entices them to
stay at your business longer, despite working in an industry where turnover
$5,864
the average cost of turnover per
rates can rise as high as 150%.8 It has the potential to save you a lot of money,
employee for restaurants
because turnover costs hospitality businesses $5,864 per employee.9

Accountability
Bonused employees are held accountable to specific performance metrics,
$13,867
the average cost of turnover
making it much easier for them to understand how their compensation is
per manager for restaurants10
being evaluated and shoot for great results.

8. CNBC
9. Cornell University School of Hotel Administration
How to Structure Bonuses at Restaurants 10. RDn2K's 2018 Recruiting and Turnover Report 3
Why
Bonuses
Are Right
for Your
Restaurant
Align the efforts of top workers (like chefs/managers) with the financial
A properly planned bonus structure will empower performance of the overall business.
your employees and incentivize them to think like
owners and do their best work every day. Still,
some restaurant operators may not see the benefits Attract talented people. The promise of a bonus can be the deciding
of bonuses and think they’re simply too generous. factor that lures someone to join your restaurant.
Here’s a list of reasons why bonuses are a money-
maker for your business.
Retain top employees. The restaurant industry and its sky-high turnover
rates make employee retention a must.

Motivate people to work harder. When bonused employees are incentivized

with the promise of more pay, they’re more likely to be engaged in their
day-to-day jobs. It puts employees' compensation in their control.

Foster leadership and teamwork. Hitting their bonus metrics requires a

level of leadership to ensure that the entire team is working cohesively
to lower costs and maximize the customer experience.
How to Structure Bonuses at Restaurants 4
 General Manager
If anyone acts like an owner, it’s the GM. They control purchases

Which
and inventory. They work closely with account managers and
vendors. They negotiate prices and contracts. They evaluate
staff members. They’re your restaurant’s top boss and liaison to
ownership — they should definitely be part of your bonus structure.

employees Chef
should you They run your kitchen. They create your menu. They work long
hours from prep to close. Incentivizing them can create a much

bonus and
better (and tastier) final product and a more cohesive kitchen.

why?
Front-of-House Manager
They shape the guest experience and are responsible for
an ever-changing staff. Extending bonuses to them can
motivate them to create the best teams possible.

Beverage/Bar Manager
They’re in charge of keeping the social lubricant flowing. Incentivize
them to keep sales up, waste to a minimum, and theft to zero.

How to Structure Bonuses at Restaurants 5

 Recipe for Creating
Bonus Structures
Plan bonus structures with your employees.
Create buy-in from the start. When employees are able to help set goals for
sales, marketing, food costs, labor costs, and other metrics, they’re more likely
to have a sense of responsibility and accountability to hitting those metrics.
Be transparent.
To truly empower people to make positive changes, you’ve got to show them
your finances. Being transparent gives them the insight they need to move your
metrics in the right direction. In fact, 70% of workers say they’re most engaged
when senior leadership is open about company strategy and policy.11
Fairness is a must.
Bonus incentives should not only create a win-win situation for employees,
but also for the restaurant operator.
11. Entrepreneur
How to Structure Bonuses at Restaurants
Objectives need to be reasonable and easily understood.
Make sure goals are aligned with industry standards rather than an
unachievable metric that only the top-performing restaurants can reach.
Give the chef/manager a realistic timetable to hit their goals.
Quarterly bonuses give your team the time to create a plan, execute it,
and make progress toward it.
Evolve your bonus structure as your restaurant grows.
As a younger restaurant, you might not be in a position to offer generous
bonuses, so you may want to stick to budgetary goals. As you grow, you
can expand those bonuses and re-examine the key performance indicators
(KPIs) to ensure they’re in line with the restaurant’s current goals.
6
 Managers don’t have input from the planning stages.
When they’re simply told the structure and terms, they aren’t
likely to be as motivated.

Common
The bonus structure makes corner-cutting too easy.
Let’s say you’re bonusing a chef on lowering food costs. That
could inadvertently incentivize the chef to shrink portion sizes

Bonus
or use lower-quality ingredients, causing menu items to suffer.

The goals are unattainable.

Mistakes
If you set metrics too high, your team won’t bother trying to hit them.

The goals are too small.

The payout needs to be significant and worth fighting for.

If structured incorrectly, bonuses can go from You aren’t using a digital restaurant management solution to easily catch fraud.
motivating to frustrating and discouraging. Let’s say a manager intentionally hides an invoice so the food costs aren’t
Here are some common bonus fails to avoid. counted against their bonus metrics. That would be impossible with a
digital solution that provides notifications when new invoices arrive.

Bonused employees aren’t empowered to make necessary changes anyway.

You must give workers the power to make critical decisions and
change broken processes if you want them to truly thrive.

The bonuses are guaranteed.

Typically, you’ll make employees work to attain certain metrics. But in
some cases, guaranteeing bonuses could help you recruit a talented chef
or manager. Also, they can be used to attract a “fixer” who can turn around
a failing restaurant. If you must guarantee a bonus, make sure you only do
so for a fixed time — then change it to merit-based.

The goals are only based on overall restaurant success.

The failure or underperformance of one unit could cost people on a
high-performing, engaged team their bonus money.

How to Structure Bonuses at Restaurants 7


Evaluations
Before you create a bonus structure, it’s important
to understand what metrics are most important to
your restaurant. Looking to improve the customer
experience? Weigh online reviews and secret
shopper results higher than other metrics. Want to
control costs? Give extra weight to food cost figures.
In any restaurant, there are basically four main
business areas to evaluate:
How to Structure Bonuses at Restaurants
Sales
Sales metrics measure the amount of revenue you’ve earned over
a particular period of time.
Pro tip: Bonus a chef or general manager based on overall sales —
or get more nuanced, providing bonuses for food sales to a kitchen
manager and bar sales to a bar manager.
Costs
Bonus employees on how well they control expenditures from food
costs to labor costs.
Pro tip: Encourage restaurant leaders to strategically control costs.
Institute an ideal cost threshold that a chef/manager can’t fall below
so you know they’re not sacrificing portion sizes, food quality, or staff
just to hit their bonus metrics.
Profitability
Tie bonus to profits, allocating a percentage for employee rewards.
Pro tip: Choose a percentage that allows you flexibility with your margins. You
want to select a number that allows you to gradually increase if the program
goes well, or gradually decrease for slow seasons.
Customer satisfaction
Measure how well customers are enjoying your restaurant by analyzing
online reviews and secret shopper scores.
Pro tip: People are more likely to write negative reviews online, so
analyze their specific complaints to make sure they're accurate. Was
the manager actually rude when saying they need to wait for a table?
Or did the customer simply not have a reservation? Remember, subjectivity
is important in this category.
8
Crunching
the Numbers
Now that you know which metrics are most important to your
restaurant, it’s time to start some calculations. Only you will know
the best way to structure bonuses for your particular business
needs, but hopefully the simple structures we provide below will
help inspire you to create the right solution for your team.

How to Structure Bonuses at Restaurants 9

 CHEF GENERAL MANAGER

Salary: Salary:
$100,000 $60,000

Bonus structure: Bonus structure:

Up to 20% of salary ($20,000) Up to 10% of salary ($6,000)

If you
KPIs: KPIs:
30% food costs (Met requirement) 40% labor costs (Met requirement)
30% labor costs (Did not meet requirement) 20% sales (Did not meet requirement)

want to
15% food sales (Met requirement) 20% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement) 10% net profit for restaurant (Met requirement)
10% net profit for overall restaurant (Met requirement) 10% evaluations from your team (Met requirement)

control
5% on reviews/secret shopper results (Did not meet requirement)
Earned 60% of potential $6,000 bonus
Earned 65% of potential $20,000 bonus
Bonus = $3,600

costs:
Bonus = $13,000

FRONT-OF-HOUSE MANAGER BEVERAGE MANAGER

Salary: Salary:
$45,000 $50,000

Bonus structure: Bonus structure:

Up to 10% of salary ($4,500) Up to 10% of salary ($5,000)

KPIs:
40% labor costs (Met requirement)
20% sales (Did not meet requirement)
20% reviews/secret shopper results (Met requirement)
10% evaluations from your team (Did not meet requirement)
10% net profit for restaurant (Met requirement)
KPIs:
50% alcohol costs (Did not meet requirement)
20% alcohol sales (Met requirement)
10% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement)
10% net profit for restaurant (Met requirement)

Earned 70% of potential $4,500 bonus Earned 40% of potential $5,000 bonus

Bonus = $3,150 Bonus = $2,000

How to Structure Bonuses at Restaurants 10

 CHEF GENERAL MANAGER

Salary: Salary:
$100,000 $60,000

Bonus structure: Bonus structure:

Up to 20% of salary ($20,000) Up to 10% of salary ($6,000)

If you
KPIs: KPIs:
15% food costs (Met requirement) 20% labor costs (Met requirement)
15% labor costs (Did not meet requirement) 45% sales (Did not meet requirement)

want to
45% food sales (Met requirement) 10% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement) 20% net profit for restaurant (Met requirement)
10% net profit for restaurant (Met requirement) 5% evaluations from your team (Met requirement)

increase
5% on reviews/secret shopper results (Did not meet requirement)
Earned 45% of potential $6,000 bonus
Earned 80% of potential $20,000 bonus
Bonus = $2,700

sales:
Bonus = $16,000

FRONT-OF-HOUSE MANAGER BEVERAGE MANAGER

Salary: Salary:
$45,000 $50,000

Bonus structure: Bonus structure:

Up to 10% of salary ($4,500) Up to 10% of salary ($5,000)

KPIs:
20% labor costs (Met requirement)
45% sales (Did not meet requirement)
10% reviews/secret shopper results (Met requirement)
5% evaluations from your team (Did not meet requirement)
20% net profit for restaurant (Met requirement)
KPIs:
50% alcohol costs (Did not meet requirement)
20% alcohol sales (Met requirement)
10% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement)
10% net profit for restaurant (Met requirement)

Earned 50% of potential $4,500 bonus Earned 40% of potential $5,000 bonus

Bonus = $2,250 Bonus = $2,000

How to Structure Bonuses at Restaurants 11

 CHEF GENERAL MANAGER

Salary: Salary:
$100,000 $60,000

Bonus structure: Bonus structure:

Up to 20% of salary ($20,000) Up to 10% of salary ($6,000)

If you
KPIs: KPIs:
20% food costs (Met requirement) 20% labor costs (Met requirement)
20% labor costs (Did not meet requirement) 20% sales (Did not meet requirement)

want to
10% food sales (Met requirement) 10% reviews/secret shopper results (Did not meet requirement)
5% evaluations from your team (Met requirement) 40% net profit for restaurant (Met requirement)
40% net profit for restaurant (Met requirement) 10% evaluations from your team (Met requirement)

increase
5% on reviews/secret shopper results (Did not meet requirement)
Earned 70% of potential $6,000 bonus
Earned 75% of potential $20,000 bonus
Bonus = $4,200

profits:
Bonus = $15,000

FRONT-OF-HOUSE MANAGER BEVERAGE MANAGER

Salary: Salary:
$45,000 $50,000

Bonus structure: Bonus structure:

Up to 10% of salary ($4,500) Up to 10% of salary ($5,000)

KPIs:
20% labor costs (Met requirement)
45% sales (Did not meet requirement)
10% reviews/secret shopper results (Met requirement)
5% evaluations from your team (Did not meet requirement)
20% net profit for restaurant (Met requirement)
KPIs:
20% alcohol costs (Did not meet requirement)
20% alcohol sales (Met requirement)
10% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement)
40% net profit for restaurant (Met requirement)

Earned 50% of potential $4,500 bonus Earned 70% of potential $5,000 bonus

Bonus = $2,250 Bonus = $3,500

How to Structure Bonuses at Restaurants 12

 CHEF GENERAL MANAGER

Salary: Salary:
$100,000 $60,000

Bonus structure: Bonus structure:

Up to 20% of salary ($20,000) Up to 10% of salary ($6,000)

If you want
KPIs: KPIs:
20% food costs (Met requirement) 20% labor costs (Met requirement)
15% labor costs (Did not meet requirement) 20% sales (Did not meet requirement)

to increase
15% food sales (Met requirement) 40% reviews/secret shopper results (Did not meet requirement)
5% evaluations from your team (Met requirement) 10% net profit for restaurant (Met requirement)
5% net profit for restaurant (Met requirement) 10% evaluations from your team (Met requirement)

customer
40% on reviews/secret shopper results (Did not meet requirement)
Earned 40% of potential $6,000 bonus
Earned 45% of potential $20,000 bonus
Bonus = $2,400

satisfaction:
Bonus = $9,000

FRONT-OF-HOUSE MANAGER BEVERAGE MANAGER

Salary: Salary:
$45,000 $50,000

Bonus structure: Bonus structure:

Up to 10% of salary ($4,500) Up to 10% of salary ($5,000)

KPIs:
20% labor costs (Met requirement)
20% sales (Did not meet requirement)
40% reviews/secret shopper results (Met requirement)
10% evaluations from your team (Did not meet requirement)
10% net profit for restaurant (Met requirement)
KPIs:
20% alcohol costs (Did not meet requirement)
20% alcohol sales (Met requirement)
40% reviews/secret shopper results (Did not meet requirement)
10% evaluations from your team (Met requirement)
10% net profit for restaurant (Met requirement)

Earned 70% of potential $4,500 bonus Earned 40% of potential $5,000 bonus

Bonus = $3,150 Bonus = $2,000

How to Structure Bonuses at Restaurants 13

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How to Structure Bonuses at Restaurants 14